Spirit Airlines Escapes Bankruptcy with Debt Deadline Extension and Cash Injection

Spirit Airlines Shares Skyrocket in Premarket Trading

Spirit Airlines shares skyrocketed in premarket trading in New York following the airline's successful negotiation with the US Bank National Association to extend a debt-refinancing deadline to the end of 2024. In addition to this, the budget airline also tapped into a revolving credit facility for hundreds of millions of dollars, bolstering its balance sheet and staving off an immediate threat of bankruptcy.

Debt Refinancing Deadline Extended to End of 2024

In an 8-K filing, Spirit Airlines announced that the deadline for refinancing its $1.1 billion debt had been postponed from Monday to December 31. This refinancing is crucial as it will determine whether the airline's credit-card-processing agreement will be extended into 2025.

Spirit Airlines Taps into $300 Million Revolving Credit Facility

The filing also revealed that Spirit Airlines had tapped into a $300 million revolving credit facility due in September 2026. This move will enable the airline to meet short-term needs such as payroll, jet operations, and emergency expenses, thus preventing an immediate bankruptcy filing. The airline stated, "Consistent with its previously provided guidance, the Company expects to end the year 2024 with over $1.0 billion of liquidity, including unrestricted cash and cash equivalents, short-term investment securities and additional liquidity initiatives, assuming that the Company is able to close those initiatives that are currently in process."

Spirit Airlines Shares Jump 71% in Premarket Trading

News of the debt deadline extension and cash injection caused Spirit Airlines shares to surge as much as 71% in premarket trading. Despite this, the airline's shares have fallen 91% on the year (as of Friday's close) following the collapse of a deal with JetBlue Airways. Bloomberg data indicates that 33% of the float is short, equivalent to approximately 35.7 million shares. This leaves around 7.8 days to cover.

Possible Bankruptcy Filing Following Collapse of Merger with JetBlue Airways

A few weeks ago, The Wall Street Journal reported that the beleaguered airline had been in talks with bondholders about a potential bankruptcy filing following the collapse of its merger with JetBlue Airways in March. The recent developments have delayed an impending bankruptcy filing and triggered a squeeze in shares.

Bottom Line

The extension of Spirit Airlines' debt refinancing deadline and the tapping into a revolving credit facility have provided the beleaguered airline with a lifeline, averting an immediate bankruptcy filing. However, the long-term stability of the airline remains uncertain, particularly given the collapse of its merger with JetBlue Airways. What are your thoughts on this development? Do you think Spirit Airlines can recover from its financial woes? Feel free to share this article with your friends and sign up for the Daily Briefing, which is delivered every day at 6pm.